"An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of9.5% and a standard deviation of return of 8%. Stock B has an expected return of 5% and a standarddeviation of return of 2% . The correlation coefficient between the returns of A and B is 0.75. The risk - freerate of return is 3.5 % . The expected return on the optimal risky portfolio isNote: Express youranswers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

Optimum risk portfolio is 0.084Explanation:

Answered: "An investor can design a risky…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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